Admin l Monday, March 20, 2023
BERLIN – Germany’s Deutsche Bank said on Monday it was hardly affected by the downfall of Credit Suisse, when the bank came to a default on certain bonds, even as the major Swiss bank’s share price plummeted.
The largest German credit institution has “almost zero” exposure to these equity-like AT1 bonds of Credit Suisse, a spokesman for the Frankfurt-based bank said.
The markets on the first full day of trading following the weekend’s bailout remained unsettled, with the most important Asian stock exchanges falling for most of the day.
The leading Frankfurt-based DAX index, which tracks the shares of top German companies including Deutsche Bank, started trading with a minus.
The shares of Credit Suisse itself slumped by over 60% to 0.71 francs ($0.76) in Switzerland in pre-market trading.
Investors are now mainly concerned about the exposure of banks and insurers to Credit Suisse bonds. Subordinated bonds, so-called AT1 bonds, are in default.
On Sunday evening, Swiss regulators had announced the takeover of Switzerland’s second-largest bank by its larger rival UBS. UBS wants to pay 3 billion Swiss francs in its own shares.
The holders of the so-called AT1 bonds of Credit Suisse are to lose their invested money completely at the behest of the Swiss financial regulator Finma. A total of 16 billion francs is at stake.
Such AT1 bonds emerged after the global financial crisis of 2007-08. The idea is to create a buffer in a crisis and thus prevent banks from collapsing quickly.
AT1 securities are thus intended to serve as a quickly available source of money for banks in crises and thus prevent the crisis from spreading in the financial sector
